Current Affairs

May 16, 2011

In 1950, two daily trains each way between NY and Boston traveled the distance in 4 hours. Called "The Merchants Limited", they let you leave at 7 AM, arrive in the other city at 11 AM for lunch and meetings, re-board by 5 pm, be back in your home city at 9 pm.

The 4 hour travel time included 20 minutes in New Haven to switch locomotives between diesel and electric, a delay no longer needed. So train travel time was actually 3 hours 40 minutes, with stops in Providence and New London.

Today, the high speed Acela makes it between NY and Boston in 3 hours 30 minutes, sometimes with no stop at all in New Haven. So 61 years later, today's "high speed trains" travel between Boston and New York 10 minutes faster than they did in 1950.

That's ten minutes faster in 61 years. At this rate, it will take 183 years for train travel time between Boston and New York fall to 3 hours

Using GPS, I recently clocked the Acela making 150 MPH between New London and Providence – for less than a minute. Also, for under a minute, it reached 149 MPH between Providence and Boston. If it went non-stop at 150 MPH all the way, the Acela could make the distance between NY and Boston in less than 90 minutes. It's the infrastructure, the tracks and the overhead gantry wires, that slow it down. Much of the time, you can look out the window and watch the cars on I-95 passing you by.

But as you go slowly through New London on the Acela, even when there is no stop there, you get a good look across the river at the Electric Boat Company. That's where we build nuclear submarines with money that could otherwise be spent to make our trains go fast.

Ross Perot pointed out in 1992 that our spending on "national defense" was 39 times per capita what Germany spent. Germany has plenty of real high speed trains. We have lame excuses for them like Acela. We also have 50,000 US troops stationed in Germany, sixty six years after we defeated the Germans in WWII. Much US taxpayer money is shipped across the Atlantic to support those troops, where Germany welcomes it because spending it there benefits the Germans.

July 05, 2010

Fascinating how discussion of the current economy almost always ignores the enormity of total debt, public plus private. We keep hearing how the rise in sovereign debt will burden our grandchildren, but the much-discussed $13 trillion of US national debt is less than 1/4 of the total debt carried by the populace.

The underlying assumption is that public debt is bad, private debt is good, and there is no need even to mention total debt, since the monetary system is basically stable. To fix the system, we keep being told, we only need to limit public spending ("tighten our belts") and rein in Wall Street to prevent those nasty ‘cycles’ of asset bubbles building and crashing.

Meanwhile, almost no one questions why total debt keeps rising, or how high it can go before it becomes unsustainable, or what happens if and when when it reaches its limit.

Why isn’t the economics profession, and the popular press, addressing these questions? When total debt reaches $50 trillion, as it has in the US, isn’t it quite possible it has hit an upper limit of sustainability? That’s $600,000 per family of four. At 5%, their interest payments would total $30,000 per year, some direct, some indirect. That's $30,000 of their income that they can't consume or invest because it is diverted to interest payments.

Is it any wonder total debt can’t go any higher? What happens when it hits its limit? Why is this never discussed, except by a few economists like Steve Keen and Ann Pettifors? How can it be ignored by the likes of Paul Krugman and Dean Baker?

She mentions the phony specter of hyperinflation. Everybody “knows” that Germany's post-WWI hyperinflation and the eventual worthlessness of the US Continental both resulted from government "printing too much money." But it just ain’t so. The German government turned the central bank over to private interests who then ruined the German Mark with hyperinflation. The Mark was rescued only when the government finally reclaimed sole power to issue money. The Continental was ruined deliberately by counterfeits the British printed by the bushel in Manhattan, not by Congress over-issuing them.

So suppose that both Britain and the US each handled their national debt not by counter-productive “belt tightening” but simply by printing money to pay it off. All of it. What would happen? Hyperinflation? Not at all.

Ellen notes that the total U.S. money supply is about $13 trillion—thus more than the approximately $11 trillion of national debt, whose escalation is scaring everybody. So printing Greenbacks to pay off the national debt in total wouldn’t even double the money supply. Inflationary? Yes, at a time when the government is trying mightily and unsuccessfully to induce some inflation to counter the deflation now hurting the economy. Maximum inflation would occur in the unlikely event that former bond holders simply spent all the money used to pay down the debt rather than re-investing any of it. The value of the dollar (and debts held in dollars) might then experience a one-time devaluation of about 30 to 40%, or about six years of the “normal” devaluation of 5% per annum.

Would that be hyperinflationary? No, not by a long shot.

But the national debt—and the interest we and our grandchildren have to pay on it—would be gone forever.

April 27, 2010

William Black (from UMKC, who I saw present at the American Monetary Institute conference in Chicago last September) lays out what Wall Street has been up to and what Obama has not been doing about it.

The only problem I see with this is that it furthers the conventional wisdom accepted by almost everyone that it was Wall Street's repackaging of liar loans that caused the crash. On the contrary, I believe the crash would have occurred sooner if no liar loans had ever been granted. This because banks would simply have stopped lending years ago when they ran out of creditable borrowers, and the crash would have happened then, albeit with maybe a smaller downturn.

Instead, banks just kept making loans, to people who they knew would never pay them back, because they knew they could sell off the loans to greater fools, as facilitated by Wall Street.

So I believe liar loans did not cause the crash, they simply delayed it, and maybe amplified it.

All because the underlying money and banking system is inherently unsustainable, for the reason that it requires that debt as a percentage of GDP keep increasing forever, and this is impossible. Once total debt, public and private, hits a ceiling beyond which it cannot go, the result is inevitable: a crash just like we are experiencing.

We have hit the ceiling: $50 trillion of combined public and private debt, over $150,000 per capita, $600,000 per family of four, whose interest payment at 5% is $30,000 per year. Isn't this a limit above which debt simply cannot go? Why is this never discussed, even on Bill Moyers' program?

March 18, 2010

We owe a debt of gratitude to Dennis Kucinich. True, he is settling for “half a loaf” he knows is laced with cyanide.But in reversing his vote on healthcare under extreme pressure, he is showing us clearly that Washington is beyond all hope, that it is now totally ruled by the oligarchy, and it feels no compulsion to pay any heed whatever to the desires of the electorate.

The outright lies spewed forth so passionately by Obama during his trip to Ohio with Kucinich in tow were particularly painful to watch. And enraging.

Obama is hell-bent to push through a health insurance bill destined to become the most despised piece of legislation since the Fugitive Slave Act.

By allowing the banks, the military industrial complex and the healthcos to call all the shots in Washington, he is sealing the doom of both his own presidency and any vestige of respect voters still have for the Democrats.

January 28, 2010

The conservative mantra includes an oft-repeated bleat against liberal "activist judges" who supposedly are all the time commiting the offense of "legislating from the bench", usurping the rightful role of legislatures who are supposed to settle issues by a more democratic process because legislators are answerable to the electorate. So it came as a big surpise a couple of years ago when two researchers reported that court records showed conservative jurists are way ahead of liberal ones in "legislating from the bench". The records revealed that conservative judges reach out from the bench to overrule acts of the legislature far more often than do liberal judges.

The recent controversial decision by SCOTUS re free speechj and politics seems to be a classic example of conservatives "legislating from the bench". They have reached out to overturn many legislative acts passed into law over the years, including for example the McCain- Feingold Act.

Interesting that even a columnist in the conservative bastion of Forbes Magazine reacted to this decision with shocked disappoval.

And it will be even more interesting to see what the legislature - Congress - can do to counter this clear exmple of an activist judiciary interfereing with the legislative process.

January 26, 2010

The Massachusetts upset shows that voters will reject Democrats, just as they previously rejected Bush Republicans, when the party shows itself to be answering to corporate "donors" rather than to voters.

Washinton D.C. is hopeless, owned by the banks, the healthcare lobby and the military-industrial complex. Time to give up on it, and turn to the state level to get two big things done closer to home:

1.Start a state owned bank.Deposit all state money in it, quit sending any state money to Wall Street.Following the example of the very successful state-owned bank in conservative North Dakota, enhance the local economy, partnering with local private banks to provide credit needed by businesses and people within the state

2. Establish a single-payer health insurance system within the state. Quit wasting huge amounts of money by sending it out of state for the big 45% markups private insurers charge, on top of the actual cost of healthcare. The savings from not paying those zero-value markups will allow the state to provide coverage far better than Medicare for everyone residing in the state, at a lower cost than the current total healthcare bill in the state.

Demand of all elected officials and candidates that they support these two steps for using local money to support the local economy, rather than wastefully sending it off to Wall Street and the health insurance companies.

1. The present system induces an inexorable increase in inequality - the "unfairness" argument – “Them That Has, Gets.”

2. The present system is unsustainable over the long run, doomed eventually to collapse in just the kind of credit crunch we are now experiencing - the "instability" argument.

"Unfairness" is by far the weaker of the two charges against the existing system, though more easily shown. The Gini index, for instance, reveals the dramatic ascent of the US in recent years into the stratosphere of inequality. The problem is, people tend to dismiss such irrefutable evidence with some version of "The poor will always be with us", which is to say, "Inequality is inevitable".

September 02, 2009

The private health insurance industry is in trouble and needs a major ongoing transfusion of cash from government to survive. This essential truth has been deliberately buried under the constant blizzard of lies about healthcare.

Health insurance companies face a serious problem.Expensive new medical treatments introduced over the years have impaired their once viable business model.After thriving for many years, the health insurance business as we know it is fast becoming unsustainable. Rising costs are driving up insurance prices, causing an ominous downward spiral of declining enrollment.